WORKS CONTRACT - VAT PMT

[venkat eswaran]

Dear Experts,

We are doing works contract for plant at Tamil nadu. we are paying VAT 14.5 percent on 70 percent on the bill value. For remaining 30 percent of bill value we are paying Ser Tax.

We are filing VAT return form I and 14.5 percent pmt made to Sales tax.

But our Contractor not paying 14.5 percent VAT we have charged in the bill. They Cut additional 5 percent VAT amount from the bill stating that Workmen welfare they are depositing VAT 5 percent in sales tax. So we are losing 19.5 percent .

Pl give me your views whether we are doing correct billing and VAT return? The contracter deduciton is correct?

Thanks 

Venkat

[YAGAY andSUN]

Dear Venkat,

We are not able to understand under which authority of law they are deducting the 5 percent on the gross amount of contract.  Please discuss with your contractor in this regard.

Regards

Team YAGAY & SUN

(Management & Indirect Tax Consultants)

[Ganeshan Kalyani]

A contractor carries out fabrication and erection work in plant. The billing done by contractor is Fabrication and erection. The Purchase order was prepared for the said job, but labour charges he will be raising bill & material during the work will be given by Plant. In this case whether it is works contract & whether service tax under reverse charge is liable to pay. kindly through some light.

AI Summary

Works contract VAT treatment questioned after contractor deducts additional amount purportedly for workmen welfare. Dispute over tax treatment of an erection and fabrication works contract: the principal applies VAT to 70% of the bill and treats 30% under service tax, filing VAT returns accordingly. The contractor withholds an extra 5% from the gross bill claiming it is deposited as sales tax for workmen welfare. Key issues are correctness of the principal's apportionment and VAT return practice, legality of the contractor's 5% deduction without statutory authority, and whether the transaction's classification triggers reverse-charge service tax.